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Friday, June 29, 2012

Barclays Top Executive Bob Diamond to Give Up Bonuses After Bank Faces Massive Fine for Illegal Manipulation of Interest Rates

Why Is This News – It Shouldn’t Be “New”

The state of
excessive executive compensation, particularly when the executive that is
the subject of discussion has performed poorly is such that it is now
considered news when said executive’s excessive compensation is reduced. Such is the case when the executives at
Barclays Bank will have to go without their bonuses this year. Here
is the why.

Barclays has been slapped with total fines of £290m for its
"serious, widespread" role in manipulating the price of crucial
interest rates in a move that has forced chief executive Bob Diamond and other
top executives to forgo any bonuses for 2012.

The £59.5m fine from
the Financial Services Authority is the largest penalty ever levied by the City
regulator, which found that Barclays contravened its rules for a number of
years and involved "a significant number of employees".

The other penalties paid by Barclays are to settle with the
US authorities, the department of justice ($200m) and the Commodities
Futures Trading Commission ($160m), as part of an industry wide probe into the way that interest rates traded
between banks were set.

Of course these fines all sounds like a lot of money,
and it is for normal people but it is really chump change for a large financial
institution. In fact, most of the
companies look upon fines like this as just another cost of doing business. Cheat a little, make a lot of money and if
you get caught and have to pay a fine, well, that just cuts into the profits by
a small amount.

The really big news
is that the management team at Barclays is actually going to have to give
up some compensation. Of course the CEO
also made the obligatory “we are gong to be a better corporate citizen”
statement too.

Diamond,
who has been pledging to make Barclays a better corporate citizen, is giving up
his bonus for 2012 as a result.

"The
events which gave rise to today's resolutions relate to past actions which fell
well short of the standards to which Barclays aspires in the conduct of its
business. When we identified those issues, we took prompt action to fix them
and co-operated extensively and proactively with the authorities," Diamond
said.

"Nothing
is more important to me than having a strong culture at Barclays; I am sorry
that some people acted in a manner not consistent with our culture and values."

Now in normal places people who do bad things in a
company lose their jobs. But at banks
the rules are different. The crime is
not breaking the rules, it is getting caught.
And the punishment is not getting fired, it is making a few million less for a year.

And of course we do have the statement of a contrite
CEO. That should count for something. And if this happens again maybe the
executives will have to stay in their rooms after work and not go out to play for a week.